Tuesday, August 30, 2016

OK, not gonna lie, I'm interested in the use of the Rubik's cube to indicate the completeness of the game plan advertised, but I was really more struck by the way in which a domain name can change an unremarkable business: franklyman.com, on the left.

Colorful personalities can produce colorful cases; first,
Pom Wonderful, now Trump. The court
certified a class action under RICO for people who bought Trump University real
estate investing seminars, including the three-day fulfillment seminar and the
Trump Elite programs, based on allegedly material misrepresentations in
advertisements, mailings, promotions, and free previews. TU customers paid anywhere from $1,495 for a
three-day fulfillment seminar up to $35,000 for the “Trump Gold Elite Program.”

Here, the court deals with various objections to expert
testimony. Plaintiff’s marketing expert,
Michael Kamins, studies how consumers interpret advertising. His expert report made four main claims: (1)
TU’s advertising and promotional campaign focused almost exclusively on
Defendant and targeted his biggest fans. (2) TU’s marketing and sales
strategies incorporated a variety of strategies to encourage prospective
customers to make decisions using emotions, rather than rational
deliberation. (3) TU’s 98% approval rating was not the product
of reliable questions or methodology.
(4) A survey Kamins conducted showed the importance to consumers of TU’s
representations that they’d learn Trump’s strategies from his “handpicked”
instructors.”

The survey was conducted online. Kamins found that “overall, 87% reported that
the opportunity to learn Trump’s real-estate strategies positively impacted
their decision to purchase a TU Live Event, and 83% reported that the offer of
being taught by Trump’s hand-picked professors positively impacted their
purchase decision.” Kamins also found a larger impact for those with more intention
to attend live events.

The court found that Trump’s objections to the survey went
to weight rather than admissibility.
Trump argued that the universe was too broad, because it targeted those
21 and over (with certain exclusions), whereas “potential TU customers must
have some basic interest in entrepreneurship, continuing education, real
estate, or business generally.” TU used direct mail to target people who had
purchased similar programs in the past. But TU also used print media, online, and
radio advertising in mainstream outlets to achieve the “widest distribution”
possible. TU’s internet advertising was geotargeted, but not targeted by
demographics. The court also pointed out
that “many of TU’s advertising slogans appear to be designed to appeal to
everyday consumers who do not have a background in real estate,” such as “I can
turn anyone into a successful real-estate investor, including you.” Where a company uses “broad marketing
techniques ... the general adult population may well be a sufficient proxy for
the relevant market.”

Trump also objected to the absence of a control group. Cohen responded that the survey went to
materiality, not to causation, and thus didn’t need a control group. I’ve got to cite the precedent, because the
question is amazing: Fahmy v. Jay Z, 2015 U.S. Dist. LEXIS 129446 (C.D. Cal.
Sept. 24, 2015) (the survey asked respondents “whether they would be ‘less
likely’ to attend a Jay-Z concert had they known Big Pimpin’ would not be
performed,” and didn’t require a control because materiality was a distinct
question from causation). [I wonder what an appropriate control here would look like; arguably the Trump name for a real estate seminar already communicated so much that consumers would make inferences about his expertise/involvement; see also the details of the pitches below. Could you remove Trump references and leave only nameless bluster?]

The court mostly agreed with Trump, because Kamins drew
causation-based conclusions in his report.
But many courts have found that the absence of a control group goes to
weight, not admissibility. Moreover,
Cohen argued that other features of the survey, such as including “don’t know”
or “no opinion” responses to close-ended questions, and comparing the response
rates for the two dependent measures, compensated for the lack of
controls. However, other courts have
found controls to be essential in the false advertising context. The court wanted to hear more argument about
the issue.

Trump also argued
that the survey was distorted from the actual market because it
presented only several pieces of TU advertising, “rather than replicating the
entire TU experience, including the 90-minute free preview and, in the case of
those who purchased TU ‘Elite’ programs, the impact of the three-day
fulfillment seminars.” But no survey can perfectly replicate an actual purchase
decision. Also, by showing
representative print ads and the 2-minute “Main Promotional Video” played at
the beginning of the 90-minute free preview, the survey showed ads
substantially similar to those which would have been encountered by prospective
TU customers, and which initially encouraged prospective TU customers to attend
the 90-minute free preview.

Trump also argued that the survey had an unwarranted demand
effect by asking if the claims in the ads had an impact on respondents’
interest in TU. But the survey
specifically asked whether the Trump-based opportunities had “a positive
impact, a negative impact, or no impact on your decision to enroll in the live
class,” which was neutral.

As for other opinions, Trump challenged Kamins’ criticisms
of TU’s purported 98% approval rating; if Trump didn’t put that purported
rating at issue at trial, the court would be inclined to exclude Kamins’
testimony on that issue.

Trump also challenged Kamins’ opinions about TU’s marketing
scheme as “unreliable, irrelevant, and overtly prejudicial.” For example,
Kamins cited academic research that “demonstrates how techniques such as using
the ‘University’ moniker, playing the ‘Money, Money, Money’ song at the
beginning of the 90-minute free preview, and setting the room temperature for
the free preview at 68 degrees, were designed to induce a more emotive decision
making approach on the part of prospective TU customers.” The court found these opinions relevant to
materiality, and reliable in being supported by Kamins’ experience in marketing
and academic studies.

Cohen’s real estate education expert, Paul Habibi, was a
lecturer at the UCLA Anderson Graduate School of Management and the UCLA School
of Law, as well as a real estate investor. Habibi also taught real estate
investment and development seminar courses at UCLA Extension. His report contained a detailed comparison of
the content taught at TU live events with that offered by leading schools in
real estate education. Habibi concluded that TU’s live program materials didn’t
“provide students with the analytical tools to systematically make sound real
estate investment decisions; sometimes promoted illegal, unethical, and/or
risky investment strategies; and did not provide any strategies or techniques
unique to Defendant.” He also reviewed
the resumes of twenty-seven TU instructors, and found that TU’s instructors and
mentors primarily had experience in sales and motivational speaking rather than
real estate investment or education.

Trump argued that the comparison was unfair, and that TU
should have been compared to “other business seminars” such as “Rich Dad Poor
Dad,” given that TU differed dramatically from academic programs in its price, length of time, focus on practical
instruction, provision of part-time education, accessibility, and the
objectives of TU students. But, if
Habibi was doing that, TU invited the comparison. In the main promo video played at the
beginning of each 90-minute free preview, Trump said:

We’re going to have professors and
adjunct professors that are absolutely terrific. Terrific people, terrific
brains, successful....The best. We are going to have the best of the best and
honestly if you don’t learn from them, if you don’t learn from me, if you don’t
learn from the people that we’re going to be putting forward –– and these are
all people that are handpicked by me ––then you’re just not going to make in
terms of the world of success. And that’s ok, but you’re not going to make it
in terms of success. I think the biggest step towards success is going to be:
sign up for Trump University. We’re going to teach you about business, we’re
going to teach you better than the business schools are going to teach you and
I went to the best business school.

Many other components of TU’s marketing scheme and live
events reinforced this comparison.

TU’s “[l]ecturer[s]” were directed to call themselves “a
member of the faculty at Trump University” and to tell customers that

Mr. Trump went to the Wharton
School at the University of Pennsylvania, and he knew that most people couldn’t
afford the time or tuition to do that. So he decided to create an organization
that would provide a world-class education, coupled with a year long
apprenticeship resulting in personal development and wealth building. He saw
the opportunity to give a Wharton School education in 3 days followed by an
Apprenticeship[,]

They were also directed to promise that “Trump University
will be your Wharton!” Moreover, TU ads
used “various forms of recognizable signs associated with accredited academic
institutions, such as a ‘school crest.’”
The “Trump University Community,” TU advertised, included “Staff,”
“Faculty,” “Instructors,” and “Program Directors (Trump University’s Admissions
Department.” Approved marketing “Catch
Phrases/Buzz Words” included “Ivy League Quality,” and marketers were told to
set a “tone”: “Thinking of Trump University as a real University, with a real
Admissions process—i.e., not everyone who applies, is accepted”; and to “[u]se
terminology such as” “Enroll,” “Register,” and “Apply.” By contrast, there was no evidence that TU
ever compared itself with for-profit entrepreneurship seminars such as “Rich
Dad Poor Dad.”

If that weren’t enough, Habibi also did have experience
teaching shorter, entry-level seminars at UCLA’s Extension school, and also
based his opinions on that. His opinion
about the illegal/unethical nature of certain TU investment strategies was
based on his extensive experience in real estate investment; he didn’t need to
be a lawyer to have relevant knowledge
of the legality of different real estate investment strategies.

The court ended by concluding that Trump’s rebuttal experts could
critique Cohen’s expert testimony, though if they became cumulative at trial
the court would exclude the cumulative testimony.

Monday, August 29, 2016

Hallatt buys Trader Joe’s-branded goods in Washington state,
transports them to Canada, and resells them there in Pirate Joe’s, a store he
designed to mimic a Trader Joe’s store. The district court dismissed Trader
Joe’s claims for lack of subject-matter jurisdiction because Trader Joe’s did
not adequately explain how Hallatt’s activity impacts American commerce. The court of appeals reversed on the Lanham
Act claim. Trader Joe’s alleged a sufficient
nexus between Hallatt’s conduct and American commerce to justify
extraterritorial application of the Lanham Act. However, Trader Joe’s didn’t
allege trademark dilution in Washington or harm to a Washington resident or
business, so the dismissal of the state law claims was affirmed.

According to the complaint, Trader Joe’s does not operate
outside of the United States, but Canadian consumers regularly travel across
the border to shop at Trader Joe’s stores located in northern Washington. Trader Joe’s also alleged fame in the US and
abroad.

Hallatt allegedly advertises his wares with Trader Joe’s
trademarks, operates a website accessible from the United States, displays an
exterior sign at Pirate Joe’s that uses a font similar to the trademarked
“Trader Joe’s” insignia, and designed the Pirate Joe’s store to mimic Trader
Joe’s trade dress. Further, Hallatt allegedly sells perishable goods at Pirate
Joe’s that he does not transport or store in a manner consistent with the
strict quality control standards used by Trader Joe’s. Trader Joe’s alleged that
it received at least one complaint from a consumer who became sick after eating
a Trader Joe’s-branded product she purchased from Pirate Joe’s.

“Trader Joe’s declined to serve Hallatt as a customer, but
Hallatt, undeterred, began donning ‘disguises to shop at Trader Joe’s without
detection’ and driving ‘to Seattle, Portland, and even California to purchase
TRADER JOE’S-branded products and evade Trader Joe’s refusal to sell them.’”
Hallatt also allegedly pays third parties in Washington to buy Trader Joe’s
goods on his behalf. On appeal, Trader Joe’s identified Hallatt as a United
States Lawful Permanent Resident (LPR), which enables him to live and work
legally in the United States.

The Lanham Act’s “use in commerce” element and broad
definition of “commerce” clearly indicate Congress’s intent that the Act should
apply extraterritorially. Steele v. Bulova Watch Co., 344 U.S. 280 (1952). Thus,
the question was “the limits Congress has (or has not) imposed on the statute’s
foreign application.” This wasn’t a subject-matter jurisdiction question but
one going to the merits.

The Ninth Circuit’s three-part test for extraterritorial
application ask whether “(1) the alleged violations ... create some effect on
American foreign commerce; (2) the effect [is] sufficiently great to present a
cognizable injury to the plaintiffs under the Lanham Act; and (3) the interests
of and links to American foreign commerce [are] sufficiently strong in relation
to those of other nations to justify an assertion of extraterritorial
authority.”

The defendant’s foreign activities need not have a
substantial or even significant effect on American commerce. The usual way to satisfy (1) and (2) is to
allege that infringing goods, though sold initially in a foreign country,
flowed into American domestic markets. Here, however, Trader Joe’s allegations that
Hallatt’s acts harmed its reputation and decreased the value of its
American-held trademarks were sufficient.
Hallatt allegedly ignored Trader Joe’s quality control. Though this was a circumvention of the first
sale doctrine, that’s ok: “[d]istribution of a product that does not meet the
trademark holder’s quality control standards may result in the devaluation of
the mark by tarnishing its image.” [So
if I sell a used Ford that’s a lemon, I’m an infringer? Many of the
foundational cases here involved goods diverted before their first authorized sale; here we see the
expansion past true first sale, possibly limited by the idea that a bulk seller
is a “distributor” while an individual seller is not. I hope Liberty Puzzles never goes after my
collection, with its crumpled tissue paper.]

Trader Joe’s theory was that “Hallatt’s poor quality control
practices could impact American commerce if consumers who purchase Trader
Joe’s-brand products that have been transported to Canada become ill, and news
of such illness travels across the border.”
[Interesting question about how to show that each link in this chain is
more likely than not, including the “brand devaluation” outcome.] The court of appeals found this concern
perfectly plausible, because food-born illness regularly makes international
news and Trader Joe’s alleged one sick customer complaint. “[R]eputational harm to an American plaintiff
may constitute ‘some effect’ on American commerce.”

“Hallatt’s alleged attempt to pass as an authorized Trader
Joe’s retailer could similarly harm Trader Joe’s’ domestic reputation and
diminish the value of its American-held marks.”
If, as alleged, Hallatt sells at inflated prices, Pirate Joe’s shoppers
“may come to mistakenly associate Trader Joe’s with overpriced goods” or poor
customer service. Trader Joe’s may
suffer harm in the US because it draws international shoppers to its
northern-Washington stores.

In addition, Trader Joe’s alleged that Hallatt engages in
commercial activity in the United States as part of his infringing scheme:
buying his inventory and hiring third parties to buy it. Such domestic economic activity weighed in
favor of applying the Lanham Act.

Part (3) of the test requires consideration of international
comity, balancing: “[1] the degree of conflict with foreign law or policy, [2]
the nationality or allegiance of the parties and the locations or principal
places of business of corporations, [3] the extent to which enforcement by
either state can be expected to achieve compliance, [4] the relative
significance of effects on the United States as compared with those elsewhere,
[5] the extent to which there is explicit purpose to harm or affect American
commerce, [6] the foreseeability of such effect, and [7] the relative
importance to the violations charged of conduct within the United States as
compared with conduct abroad.”
Considering these factors, it was appropriate to apply the Lanham Act to
Hallatt.

For conflict with foreign laws: a conflict typically exists
if there’s an ongoing trademark dispute or similar proceeding abroad, which
there was not here. Hallatt’s admission
that he holds LPR status weighed in Trader Joe’s’ favor, and he allegedly has
assets here.

As for the relative significance of effects, the court
quoted McCarthy on trademark’s twin goals of “protect[ing] property” in
trademarks and protecting consumers from confusion. The property was American; the most likely
deceived consumers were Canadian, and federal courts ordinarily don’t have an
interest in protecting foreign consumers from confusion. But Trader Joe’s alleged that its trademarks were
well-known in Canada, and that more than forty percent of the credit card
transactions at one Washington store were with non-United States residents.
Hallatt’s sale of Trader Joe’s goods in Canada had the potential to mislead
these consumers, weighing in favor of extraterritorial application.

Trader Joe also pled facts indicating a purpose to harm
American commerce, or at least the foreseeability of that. As for the relative importance of the conduct
within/without the US, an essential part of Hallatt’s commercial venture was in
the US. Still, arguably the most
important part occurred in Canada: the display of Trader Joe’s marks on the
store in a way that confused Canadian consumers and the resale of Trader Joe’s
goods. This factor weighed against extraterritorial
application of the Lanham Act. Still,
overall, the factors didn’t weigh against extraterritorial application.

State law: Washington’s dilution statute requires fame in
Washington and diluting conduct in Washington.
Trader Joe’s argued that the law only required dilution, not diluting
activity, to occur in Washington, but the court disagreed, given that the
primary remedy was the power of courts to enjoin “commercial use in this state
of a [famous] mark.” A ripple effect wasn’t enough; use in Washington was
required, and Trader Joe’s didn’t allege that.

Similarly, the Washington Consumer Protection Act claims
required the practices at issue to be carried out in “trade” or “commerce,” including
“the sale of assets or services, and any commerce directly or indirectly
affecting the people of the state of Washington.” In Thornell v. Seattle Servs. Bureau, 363 P.3d
587 (Wash. 2015), the state Supreme Court held that the CPA creates a cause of
action for a plaintiff residing outside of Washington to sue a Washington
corporate defendant for allegedly deceptive acts, as well as for an
out-of-state plaintiff against an out-of-state defendant for the allegedly
deceptive acts of the defendant’s in-state agent. This scope prevented Washington businesses
from targeting out-of-state consumers for harm.
Here, though, none of the defendants were Washington residents. Trader
Joe’s is a California corporation, so harm to the value of its trademarks was
not a Washington-based harm. The alleged deception at the heart of the case allegedly
occurs only in Canada and therefore harms only Canadian consumers. Nor did Trader
Joe’s’ complaint allege that the existence of a low-quality, high-cost Trader
Joe’s knock-off store in Vancouver puts honest Washington grocery stores at a
competitive disadvantage.

The parties compete in the market for marine fuel additives. Star-Brite argued that Gold Eagle’s false
advertising counterclaim was barred by laches; the court refused to grant
summary judgment because of material issues about the time at which Gold Eagle
could have satisfied all the elements of a false advertising claim, especially
showing harm from the falsity.

The Lanham Act borrows a presumptive laches bar from
coordinate state law causes of action; Florida’s relevant limitations period is
four years. Star-Brite argued that, as
early as 2007, Gold Eagle had reports that Star-Brite’s product didn’t perform
as advertised, and Gold Eagle was also aware of a false advertising
counterclaim filed against Star-Brite in 2009.
Gold Eagle didn’t counterclaim until 2014. Gold Eagle argued that, before 2010, Gold
Eagle’s product testing was focused on benchmarking against competitors, not on
whether Star-Brite’s claims were true, and that the other litigation created
doubt that the relevant tests could falsify Star-Brite’s claims. In addition, though Star-Brite emerged as a
direct competitor in 2008, Gold Eagle didn’t start losing market share to
Star-Brite until late 2010.

The court couldn’t conclude as a matter of law that Gold
Eagle’s delay was unreasonable. Gold
Eagle’s evidence indicated that it filed its claims within four years of
determining that it had provable claims; it was not until October 2010 that
Star-Brite began gaining market share from Gold Eagle and Gold Eagle thus had
evidence of harm, as required to prevail on a Lanham Act claim. Moreover, the
earlier litigation between Star-Brite and a third party “reasonably deterred
the filing of a false advertising claim until 2012, when the majority of marine
engine OEMs agreed that the [tests at issue] were appropriate to use when
testing all ethanol fuel additives, including [Star-Brite’s].” Finally, it was
not until after Star-Brite sued Gold Eagle that Gold Eagle determined in
discovery that Star-Brite’s product did not contain enzymes (relevant to
falsity).

Likewise, Gold Eagle’s state law claims weren’t barred by
the statute of limitations. Floriday follows the continuing tort rule, and the
evidence showed that Star-Brite continued its allegedly false ads after the
counterclaims were filed. Thus, Gold
Eagle could recover damages for tortious acts committed within the limitations
period prior to the filing of suit, allowing a four-year look-back period as
well as injunctive relief.

Thursday, August 25, 2016

Classic Liquor is a newcomer to the liquor business that
recently launched a line of vodkas under the mark ROYAL ELITE. It brought a declaratory judgment claim
against SPI based on SPI’s “elit by Stolichnaya” vodka brand. The court
declined to grant summary judgment on non-infringement, but dismissed most of SPI’s
false advertising-based counterclaims.
The state-law claims that survived indicate the importance of state-law
claims where competitors are allowed to sue; state laws may not follow the
calcified false/misleading distinction made under the Lanham Act.

Several ROYAL ELITE marks have been approved for
publication, and SPI has opposed two of them.
SPI has four relevant registered marks, STOLICHNAYA ELIT and three
figurative/stylized:

One stylized mark

Another stylized mark

The most recently registered stylized mark

Plaintiff made changes to the bottle during the course of
the litigation: “ROYAL” is now close to the same font size as the word “ELITE”;
a label bearing the ROYAL ELITE mark around the neck of the bottle was replaced
with a sticker bearing the mark vertically; and there were other changes, all
of which the court deemed immaterial to the matter at hand.

Royal Elite bottle

Stoli elit bottle

The false advertising counterclaims were based on: (1) the
inclusion of the ® symbol next to the word “ROYAL” (falsely signifying that
plaintiff owns a trademark registration in ROYAL or ROYAL ELITE) and (2) the
inclusion of the words “Since 1867” on the front of plaintiff’ s bottle.

SPI failed to bring an infringement claim, even though that’s
generally a compulsory counterclaim in a declaratory action for
non-infringement. But that didn’t entitle Classic Liquor to a default judgment
of non-infringement; instead, the burden still rested on SPI to prove
infringement, and if SPI did so, it could still get an injunction. Starter Corp. v. Converse, Inc., 170 F.3d 286
(2d Cir. 1999).

Strength: while two of SPI’s marks were incontestably
distinctive, that didn’t “make every component of those marks irrefutably
strong for purposes of the Polaroid analysis.” SPI didn’t have a word mark in
ELIT, but rather it had registrations for stylized versions of ELIT, a word
mark in STOLICHNAYA ELIT, and variations on the stylized versions plus other
stuff. SPI’s confusion theory depended
only on ELIT. The court brushed aside
SPI’s implausible argument that ELIT was a coined term; “[a] slight misspelling
of a word will not generally turn a descriptive word into a nondescriptive
mark,” especially given SPI’s positioning of ELIT as “ultra-luxury” and its
argument that ELITE and ELIT had the same commercial impression. Self-laudatory terms are usually deemed descriptive,
but a weird outlier case in the Second Circuit says they’re suggestive. Estee
Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1509 (2d Cir. 1997), so district
courts make case by case determinations.
Here, that didn’t save ELIT from descriptiveness. SPI argued that “elite”
wasn’t an adjective describing a quality or characteristic, but rather a noun
that “normally designates a group or class of persons in society.” Fortunately,
the Eighth Circuit has already spoken on this precise issue:

Our dictionary defines “elite,”
when used as an adjective, to be synonymous with “choice, superior, select.”
Webster’s Third International Dictionary 736 (1976) (citing “an [elite] brand
of coffee” as example of usage). Although plaintiff contends, based on another
dictionary, that “elite” may refer only to persons, we conclude that the word
may be used to describe objects as well. Because the word “elite” indicates
superior quality, as used here it is a “self-laudatory” mark. ... Because
“elite” is descriptive, plaintiff must show that the mark has acquired
secondary meaning to obtain protection.

The court then found disputed issues of fact over whether
ELIT had developed secondary meaning, despite an April 2015 market research
report that SPI commissioned finding that “overall awareness of elit remains
very low” and that “[t]he main reason to try elit by Stolichnaya is due to a
desire to experiment with new brands.” An SPI internal marketing document states
that “[t]he correct full name is: elit by Stolichnaya” and instructs, “[n]ever
use: elit by Stoli, or Stoli elit. Wherever possible ‘elit by Stolichnaya’
should be written on one line.” The product had only $6.6 million and $5
million in sales in 2014 and 2015, respectively, and numerous other spirits
brands that use variations of ELITE in trademark registrations and to market
liquor products.

However, elit was supported by an annual marketing budget in
the range of $3 million per year. Awareness of elit significantly increased
since July 2014; the brand enjoys strong retention rates; and the brand’s
recognition on social media has substantially improved. There was also some
evidence that the product is colloquially referred to as “elit.” SPI further
argued that the exclusive, high-end vodka market is by definition small, and that
marks for luxury brands can achieve secondary meaning without having meaningful
market share. Moreover, SPI argued that many of the registrations identified by
Classic Liquor had been cancelled or abandoned, and that those that have not were
easily distinguishable from the ELIT Marks.
Drawing all reasonable inferences in favor of SPI, this was enough to find
a genuine factual dispute over protectability/strength.

Similarity weighed slightly in favor of SPI. The court declined to defer to the USPTO’s “implied
view—by virtue of having approved plaintiff’s applications for publication—that
plaintiff’s marks do not give rise to a likelihood of confusion.” The publication decision wasn’t accompanied
by any analysis of the issues raised here, and the TTAB opposition proceedings
are stayed.

The parties competed directly, favoring SPI.

There was “some evidence of confusion in the marketplace” in
that “a lounge in New York City known as Vandal lists both ‘Royal Elit’ (sic)
and ‘Stoli Elit’ on its nightclub’s bottle menu.” [Although it could just be
that nobody can spell, which is part of the reason for the usual rule about
minor misspellings.] “It is at least plausible that customers viewing this menu
would be likely to mistakenly believe that the two products are affiliated.” Similarly,
a brand promoter hired by Classic Liquor referred to “Royal Elite” as “Royal
Elit” in correspondence with Classic Liquor. These “isolated instances of actual
confusion” didn’t show actual consumer confusion,
but were “probative of how easily consumers might do so,” and slightly favored
SPI.

The court did reject SPI’s argument that confusion was shown
because a search for “elite” and “vodka” on Pinterest returned photos of both
Royal Elite and elit by Stolichnaya. “Given the contrived nature of the search,
the Court does not find the results to constitute evidence of actual confusion.
The results do, however, reinforce the Court’s determination, discussed above,
that ELIT is a descriptive, self-laudatory term.”

Good faith/bad faith: Another genuine issue. Based on the
timeline, Classic Liquor’s argument that the ROYAL ELITE mark was inspired by
the legend of Tamerlane’s “Royal Elite” brigade and by the fact that the vodka
is consumed primarily by upper-crust Uzbeks was flatly contradicted by the
record. “Whether plaintiff’s apparent misrepresentation is an inadvertent (or
immaterial) one or whether plaintiff is attempting to mask a bad-faith motive
for adopting the ROYAL ELITE mark is a factual issue that cannot be resolved on
summary judgment.” The court pointed to other
evidence that could indicate bad faith: Classic Liquor’s national sales
director instructed an employee that the preferred placement for Royal Elite
products was to the left of SPI’s Stolichnaya products.

Consumers: SPI argued that “desire for luxury products and
status symbols does not imply a sophisticated consumer,” but its internal
marketing documents revealed that it catered to “a more sophisticated segment
of the vodka market,” so this factor favored Classic Liquor.

Overall, summary judgment was inappropriate.

False advertising: ® wasn’t a misrepresentation of an “inherent
quality or characteristic” of the goods.
SPI responded that this language is just the Second Circuit’s way of
saying “materiality,” and that, because ® was literally false, materiality was
presumed. But the court of appeals has
said: “Falsity alone does not make a false advertising claim viable; ‘[u]nder
either theory [of falsity], the plaintiff must also demonstrate that the false
or misleading representation involved an inherent or material quality of the
product.’” Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51, 63 (2d Cir.
2016). The court here reasoned: “The
purpose of federal registration is to put the public on notice of the
registrant’s ownership of the mark; the goods or services to which the mark
pertains are entirely irrelevant.” Thus,
the false marking was not actionable as a matter of law.

As for Classic Liquor’s use of “Since 1867” on its vodka
bottles, this wasn’t an unambiguous falsity. SPI argued that, if the claim meant selling
vodka since 1867, it was false; if it meant that the same product had been sold
by others since 1867, it was false; and if it meant that its Tashkent
distillery could trace its roots to a distillery founded in 1867, that too was
false. But this very list showed ambiguity, and there was no extrinsic evidence
of consumer deception. (One of Classic
Liquor’s witnesses testified that some distributorship customers have asked
about the significance of “Since 1867,” “a fact which further demonstrates that
the message of the designation is ambiguous.”)

The district court then addressed the argument that “it
would be illogical to require extrinsic evidence of consumer deception if it
were the case that each possible message conveyed by an ambiguous statement was
indisputably false.” [Note from RT: This
argument was implicitly accepted by an older Second Circuit case finding each
of three possible meanings false and thus finding literal falsity. Johnson
& Johnson v. GAC Intern., Inc., 862 F.2d 975, 979 (2d Cir. 1988).] However, Classic Liquor provided an
additional, non-false potential meaning: “Since 1867” refers to the fact that
the distillery was founded in 1867, not that the vodka has been produced in the
exact, same building using the exact same equipment that was in use in 1867.

Consumers might very well be misled by “Since 1867,” deeming
it to refer to the product or to Classic Liquor itself rather than to the
distillery that manufactures Royal Elite vodka. But that possibility, without
extrinsic evidence, wasn’t enough. Thus,
Classic Liquor won summary judgment on the Lanham Act claim, which also kicked
out the coordinate common-law unfair competition claims.

SPI’s counterclaims brought under §§ 349 and 350 of the New
York General Business Law “are not mere Lanham Act analogues.” They require (1) consumer oriented conduct,
(2) that was misleading in a material way, and (3) that injured the plaintiff. “The inclusion of this symbol on plaintiff’s
vodka bottles—which, again, serves to put potential infringers of a mark on
constructive notice that the mark is owned—was not consumer-oriented as a
matter of law.”

However, the “Since 1867”-based claims survived, because
state law doesn’t make the rigid false/misleading distinction requiring
extrinsic evidence of deception for all ambiguous claims. “[T]he inquiry under
§§ 349 and 350 of the New York General Business Law is objective in nature,
requiring courts to assess whether a given practice or advertisement is “likely
to mislead a reasonable consumer acting reasonably under the circumstances.” Whether the misrepresentation caused SPI
damage was a disputed issue of fact.
[And materiality?]

Canada, like many other countries, considers "taking unfair advantage" of a trademark to be a distinct problem, making it less favorable to parody and other uses than the U.S. as a matter of formal law. What difference does that make in practice? From what I've seen, it means that grocery stores/pharmacies don't carry house brands that tell you they're comparable to national brands. However, it doesn't seem to affect the T-shirt offerings of tourist traps. (Side note: there was also more overt misogyny on offer than I would have expected. Really, Canada?)

Not quite Rolls Royce

One of many John Deere alternatives--Canada also uses "fuck" more liberally at standard tourist stores

MasterCard and Red Bull, sexualized

Red Moose/Red Bull and Star Wars

John Moose instead of John Deere; Star Wars again; and what do we think of the Montreal logo v. Adidas? This one was everywhere

Mountain Dude

This one is more consumer/contract law: "no contract" is also a thing in Canada; I wonder what the law is about that

Right of publicity claim for the Michael Jackson estate?

Snoop Dogg or just a dog?

Lady PurrPurr?

Queen size?

A little tramp?

Too close to Superman?

An entire province devoted to Pokemon

Pizza Pot, Zig-Zag, Addicted, Kick Ass, Fuma

National Pornographic, another John Fucking Deere, sex-based "I'm Lovin' It" and some of the aforementioned misogyny

When an opinion begins with the quote, “You keep using that
word. I don’t think it means what you think it means,” it’s not going to go
well for the false advertising defendant.

Plaintiffs brought the usual California claims against three
off-price retailers under the TJX umbrella: TJ Maxx, Marshalls, and HomeGoods. TJX’s price tags list (1) the price the
retailer is selling the item for; and (2) a higher, comparative reference price
accompanied by the phrase, “Compare At.” Neither tags nor ads define the term “Compare
At” or otherwise offer context for the pricing provided. Some of defendants’
products also have a second price tag noting a purported manufacturer’s
suggested retail price, or “MSRP,” for an item. Where is “compare at” defined? A page on the TJ Maxx website, found by
searching the fine print, and a sign near the customer service/returns counter
at one retailer store. It says:

The “compare at” price is our
buying staff’s estimate of the regular, retail price at which a comparable item
in finer catalogs, specialty or department stores may have been sold. We buy
products from thousands of vendors worldwide, so the item may not be offered by
other retailers at the “compare at” price at any particular time or location.
We encourage you to do your own comparison shopping as another way to see what
great value we offer.

Plaintiffs alleged that they, like other reasonable
consumers, expect that the “Compare At” tags listed “prices at which the
‘principal retail outlets’ in California have sold, or are selling, those
products in any ‘substantial volume.’” This picks up on the FTC’s preferred
means of substantiating such a claim.
Using the term for unverified estimates of possible prices, they argued,
was deceptive.

The court quickly disposed of TJX’s standing challenges,
including its challenge to plaintiffs’ standing to seek injunctive relief. “It is inconceivable to think prospective
relief in the false advertising context is bound by the rules of ‘fool me once,
shame on you; fool me twice shame on me.’” Accepting the no-standing argument would “eviscerate”
California’s consumer protection laws.

TJX argued that plaintiffs hadn’t alleged sufficient facts
about why the tags were deceptive to a reasonable consumer. It argued that the FTC guidelines allowed it to
offer price comparisons between one item and another of comparable value, and
that those comparisons could be based on good faith estimates. However, the FTC
specifies that comparison prices cannot “appreciably exceed the price at which
substantial sales of the article are being made in the area.” Comparisons must thus be based on actual
prices, not “estimates” of prices at which “a comparable item” in another store
or catalog “may” have been sold. By
contrast, TJX’s definition says outright that an item “may not be offered by
other retailers at the ‘compare at’ price at any particular time or location.” “If
Defendants believe that ‘estimates’ are the same as ‘comparisons with actual
merchandise,’ then the Court is here to say that this word does not mean what
you think it means.” The court referred
to TXJ’s practice as looking at “what a fictitious retailer may charge.” Ulp.

Moreover, the FTC had more limits; the FTC Guidelines
require retailers who use reference pricing to make “clear to the consumer that
a comparison is being made with other merchandise.” This TXJ failed to do: “a link at the bottom
of a webpage and a sign near the return counter, not the sales counter, will
not suffice” given the predominance and prominence of the “compare at” claims. “[I]t
is unrealistic for Defendants to expect consumers to pull out their smart
phones and search the retailer’s website for a definition of the seemingly
clear phrase, or chance that they see a sign offering insight before they reach
the check-out counter.” The tags and ads therefore didn’t clearly communicate a
comparison between “like” items rather than with the same item.

As the court pointed out, there’s a reason that retailers
use reference pricing: “it makes consumers think they are getting a deal.” Relying
on the plain meaning of “compare at” to draw in consumers while also using an
unrecognizable internal defintion of that phrase “is not very sportsmanlike.
Anyone who says differently is selling something.”

Friday, August 19, 2016

Jake Linford has recently expounded in detail about the descriptive or even functional characteristics of certain sounds, making certain "coined" words more useful in marketing. Here's a great example from Michael Saler, As If: Modern Enchantment and the Literary Prehistory of Virtual Reality (2012): "Some critics found these names ridiculous, but Lovecraft countered that 'a coined word which has been shaped with great care from just the right associational sources' could be effective, evoking sensations from Symbolist poetry. 'Cthulhu' was self-evidently le mot juste."

Thursday, August 18, 2016

FWI sued CFDA for trademark dilution, unfair competition and
false designation of origin, and trademark infringement based on use of of “NEW
YORK FASHION WEEK” and its acronym “NYFW” (“NYFW THE RUNWAY SHOWS” was also
theoretically at issue, but not really pressed; the court didn’t think FWI had
a protectable mark in that phrase). On
June 28, FWI sought a TRO and a preliminary injunction against the use of these
terms in connection with live semi-annual events in New York during which
fashion designers launch new clothing lines. The court denied these requests.

CFDA’s showcase events date back to 1943 when “Press Week”
was launched, an event dedicated to promoting American designers of women’s fashion.
The semi-annual week-long events in New York “are recognized as one of the four
major fashion weeks in the world.” From 1993-2015, they were formally named
after their location or sponsor, such as “Olympus Fashion Week” and
“Mercedes-Benz Fashion Week,” but in the press and the industry, they were
widely referred to as “New York Fashion Week” from at least 1993 onwards. In 2015,
CFDA went with “New York Fashion Week,” “NYFW,” and “NYFW The Shows,” in promotion
and production of the fashion events, as well as a new domain name, NYFW.com.

FWI produces fashion shows and sells tickets to “consumers
and fashion aficionados,” positioned as “publicly accessible alternatives to [CFDA]
fashion events which are restricted to members of the fashion industry and
media only.” FWI shows are one day long and coincide with the defendants’
semi-annual schedule. FWI registered NEW
YORK FASHION SHOWS in 2012, and produced three fashion shows under that name,
then in 2013 renamed itself Fashion Week Inc. and applied for NEW YORK FASHION
WEEK on the Supplemental Register. The
application was granted for online entertainment ticket agency services in 2014.
FWI produced and sold tickets to two fashion shows under the NEW YORK FASHION
WEEK mark—a show in September 2014 and a show in September 2015. Both sold five
hundred tickets and earned $25,000-30,000 in profit.

FWI applied to register NYFW for online ticket sales for
entertainment and fashion shows in May 2015, after defendants announced their
intention to use NYFW online to promote their fashion events. The mark issued on the Principal Register in
December 2015. In August 2015,
defendants sent FWI a C&D “requesting that FWI cease promoting its fashion
shows online in a manner that might mislead consumers into thinking they were
purchasing tickets to the [CFDA] events.”
In ensuing discussions, FWI offered to transfer its marks and sponsors
to defendants “and threatened litigation, delay, and bad press.” FWI
subsequently filed trademark applications for the marks NEW YORK FASHION WEEK
THE RUNWAY SHOWS, NYFW THE RUNWAY SHOWS, NYFW and NEW YORK FASHION WEEK for
organization of fashion shows for entertainment purposes.

In July 2015, CFDA organized and produced the September 2015
and February 2016 fashion events. In April and June 2016, FWI sent cease and
desist letters to defendants about the marks.
This litigation resulted. CFDA’s next fashion events were scheduled to
begin on September 8, while FWI didn’t have any fashion shows presently
scheduled; plans to hold an event in February 2017 had been put on indefinite
hold after FWI’s anticipated sponsors severed ties with FWI.

The district court began by assuming that eBay and Salinger required it to reject any presumption of irreparable
injury based on likely success on the merits, even in a trademark case. This change also changed the significance of
delay, once used to rebut such a presumption.
Now it’s just a “significant” factor to consider in determining
irreparable harm. Here, FWI’s delay in
suing and moving for an injunction “argues strongly against granting the
preliminary injunction.” In January
2015, after all, CFDA had filed a petition to cancel the NEW YORK FASHION WEEK
mark, and the petition included CFDA’s representation that it had made
continuous use of the trademark since at least 1994. Plus, there was the April 2015 announcement
that CFDA would be using NYFW as part of its domain name and on social media
platforms. In its moving papers, FWI even included a news article from January
2015, reporting that the defendants’ event in September 2015 would be called
“New York Fashion Week.”

FWI argued that its delay was due to investigation and
settlement discussions, but there was no evidence that defendants ever
considered reverting back to a sponsor-based title. In light of the public announcements, at
least by August 2015, FWI’s belief that CFDA would reverse course was
unreasonable. After the shows in September 2015 and February 2016, FWI knew that
CFDA wasusing the marks it claimed a right to use, but FWI continued to do
nothing.There was no evidence that settlement discussions continued into 2016,
but even if they had, the time between their alleged collapse in January and
June 2016 was too long.

In addition, FWI failed to show actual irreparable
harm. Loss of control over one’s reputation
is irreparable because this loss “is neither calculable nor precisely
compensable.” [Note that if this is
really true, we’re back to the presumption of irreparable injury, because
courts have told us that lost control is what confusion means. If courts acknowledge
that, in fact, what they call confusion is often unlikely to pose significant
risks to the plaintiff’s reputation—perhaps because of the demonstrated
resilience of strong brands—then this claim makes some sense even in a world
without presumptions of irreparable injury, but it does call into question why “confusion”
is defined so broadly.]

Here, FWI didn’t provide sufficient evidence of goodwill
that it could lose. It only presented
evidence that it used the NEW YORK FASHION WEEK mark in connection with the
September 2015 fashion show, and it didn’t submit evidence of brand loyalty or
recognition in the industry.

Separately, FWI failed to show likely success on the merits—you
can tell from this discussion that there are serious doubts about the validity
of its asserted marks or their extension beyond “online entertainment ticket
agency services.” FWI argued that consumer confusion, evidenced by emails to
FWI seeking to buy tickets to the CFDA events, showed secondary meaning and
harm. The court thought otherwise—CFDA,
not FWI, was likely to show secondary meaning in these descriptive marks. Though CFDA didn’t use “NEW YORK FASHION WEEK”
to describe itself until recently, the press and industry did, and it could claim
trademark rights in nicknames. (Industry
evidence included a declaration from Anna Wintour, FWIW.)

Unsurprisingly, the balance of equities and the public
interest also argued against any injunction.
An injunction would disrupt the upcoming New York Fashion Week, which
was “an important asset to the New York economy,” and would deprive the public
of a useful term by which to describe the events.

Sophia Eggleston alleged that her self-characterization in
her 2009 memoir The Hidden Hand was
the uncredited inspiration for the character Loretha “Cookie” Lyon on the FOX
television series Empire, and sued
for copyright infringement (and violation of her right of publicity). The Hidden Hand recounts “many
significant events” in Eggleston’s life, including “the attempted kidnapping of
her youngest daughter, and coming to terms with her brother’s homosexuality,
which he revealed to her while she was in prison,” as well as numerous gun
threats and the murder of her two sisters.
The memoir also covers her romantic relationship with a man in the music
business.

In Empire, Cookie
Lyon, the imprisoned, drug-dealing ex-wife of the man in control of Empire
Entertainment, gains release and demands her share of the company. “Thus begins the struggle for control of
Empire Entertainment between Lucious, Cookie, and their three sons: Andre, a
married businessman with bipolar disorder, Jamal, a gay singer rejected by his
homophobic father, and Hakeem, a talented but unfocused rapper.” Eggleston alleged that there were many
striking similarities between her self-depiction and Cookie Lyon’s character:
they’re “both light-skinned African-American women who wear expensive clothing,
lead gangs, have placed hits on men and sold drugs, have gay family members,
have two family members who were murdered, have served prison sentences, and
are known for their ‘vicious insults’ and propensity to slap people.” They’ve
both “shielded others by stepping in front of a loaded gun, have endured the
kidnapping or attempted kidnapping of one of their children, lost their lovers
while in prison, and attacked their former lovers’ new lovers upon release from
prison,” as well as making liberal use of “hoe” and “bitch.” Fox, understandably, contended that these
were stock features, which seems correct.

However, the court refused to dismiss the copyright
infringement claim. Copyright in facts
is thin, but selection and arrangement of facts are protectable. [But if your selection principle is “this
happened to me,” that can’t be a protectable selection method, any more than
alphabetical ordering is protectable even though some methods of ordering (top
10 books) may be.] The court took back
all its statements about filtering by agreeing with
Eggleston that the appropriate comparison was between “copyrightable elements
of her self-portrayal in The Hidden Hand”
and copyrightable elements of the Cookie Lyon character.

The court agreed that the twenty-three elements Eggleston
listed in her complaint “represent a protectable compilation of experiences and
traits,” and constituted more than the sum of its parts. Though at first glance, many of these elements
seemed typical to “stories about those involved in drugs and violence.” But featuring a woman “in the dominant role
as drug dealer, gang leader, and perpetrator of violence. This is not the stock
and trade of the average drug gangster potboiler.” The court commented that “Defense counsel
could not offer examples of other works in this narrative genre that featured
female characters in the ‘drug or organized crime boss-like’ role,” and that
the court found only the 2011 telenovela series La reina del Sur produced by
Telemundo or the 1999 Jorge Franco novel Rosario Tijeras.

[Separately, this reasoning would still be wrong without
these examples. It may be unusual, but
implementing the idea “the surgeon was the child’s mother!” is not
unknown. And it’s also just an idea, no
matter what profession it’s applied to. The
scenes a faire that follow may gain new resonance because of the audience’s
reaction to the gender-swap, but they’re still scenes a faire. Moreover, the court’s explanation reveals the
far deeper flaw: copyright is for expression, but the characteristics plaintiff
alleged were copied are—according to plaintiff herself—facts, and there is no
protection for facts no matter how difficult they were to produce or live
through. By saying that the similarities
are between plaintiff and Cookie Lyon, rather than between a character
plaintiff created and Cookie Lyon, the court reveals the fundamental error
here.]

[And the court makes it worse by allowing plaintiff to carve
up the work any way she wants and claiming protection only in the “character,”
instead of treating the memoir as the
expressive work protected by copyright.
Once you slice out the “character” (who actually only exists in
conjunction with the plot, sequence of events, mood, etc.—try to imagine James
Bond hosting a cooking show and see if there’s still “James Bond” there), then
all other dissimilarities in the works can be ignored, even though they are
crucial to any actual audience’s perception of the character. Justin Hughes did great work
warning about this, but it still happens.]

The court found that some elements [facts about Eggleston]
were “also not obviously of the stock-standard variety, regardless of a
character’s gender.” For example, both
Eggleston and Lyon had a gay family member.
[Okay, if you have ten people in your close family, it would appear that
the
odds are actually pretty good that you are closely related to a gay person. True, previous generations would have been
somewhat less likely to write about it, but so what?] Other “unusual” commonalities between Eggleston and Lyon were that they both “experienced
the kidnapping of one of their children, have had two close family members
murdered, have lost their lovers while serving time in jail, and have shielded
others by stepping between them and a loaded gun. Taken together, these
elements are arguably original and substantially similar.” [To put the objection another way, these
elements aren’t original to Eggleston. She didn’t, I take it, make her brother gay,
kill her lover while she was in jail, or point a loaded gun at someone she
cared about. Stepping in front of the
gun, while brave, is not a creative act even though the precise words she used
to describe that event might be
copyrightable.]

Eggleston’s copyright claim survived the motion to
dismiss. Her right of publicity claim didn’t,
because she didn’t plausibly allege a pecuniary interest or any commercial
value in her identity.

Wednesday, August 17, 2016

Plaintiffs claimed that, as college football and basketball
players, they had publicity rights in their names and images as used in TV
broadcasts. “Whether referees, assistant
coaches, and perhaps even spectators have the same rights as putative licensors
is unclear from the plaintiffs’ briefs.”
Tennessee’s right of publicity statute, however, explicitly excluded any
“sports broadcast,” and Tennessee refused to recognize any common-law right of
publicity. This also killed a Sherman
Act claim, since there could be no conspiracy to control a non-existent right.

Plaintiffs’ Lanham Act claims failed because—well:

The theory here is that if, say,
ESPN shows a banner for ‘Tostitos’ at the bottom of the screen during a football
game, then consumers might become confused as to whether all the players on the
screen endorse Tostitos. Suffice it to say that ordinary consumers have more
sense than the theory itself does.

But honestly, is this theory (which was justly rejected) any
more ridiculous than the theory that consumers might think that a fast food
restaurant endorsed a movie about beauty queens? That consumers might think that Jose Cuervo
had partnered with a whiskey company because both used red wax seals among many
other packaging devices? That Budweiser
might have endorsed a parody ad for Budweiser Oily? And, if we have nothing but common sense to
guide us here, on what basis exactly is the players’ theory so easily
distinguishable from those successful claims that it doesn’t even reach
plausibility?

Goldstein sued for infringement, contributory infringement,
violation of the DMCA’s CMI provisions, and violation of the Lanham Act.
Easiest bit first: Goldstein alleged that MRIS’s addition of its own copyright
watermark to the Metro Photograph was a false representation under the Lanham
Act. Although this sounds like a false advertising claim, the court found it Dastar-barred: Dastar held that “claims of false advertising and trademark
infringement under the Lanham Act do not overlap with copyright claims” because
“origin” means physical origin, and because otherwise plaintiffs could create a
kind of perpetual copyright or patent.
“Thus, ‘creative’ works, those artistic creations that fall within the
ambit of copyright law, necessarily fall outside the scope of the Lanham Act.” This is overstated in some significant ways,
but query whether anyone’s found a way to say it better.

Direct infringement: MRIS argued that Goldstein didn’t allege
“volitional conduct” by MRIS, relying on Costar Group, Inc. v. LoopNet, Inc.,
373 F.3d 544 (4th Cir. 2004). Direct infringement requires “actual infringing
conduct with a nexus sufficiently close and causal to the illegal copying that
one could conclude that the machine owner himself trespassed on the exclusive
domain of the copyright owner.” In Costar, LoopNet was a passive ISP that
could not be held liable for direct infringement of Costar’s copyright when
Costar’s unmarked photographs appeared on its website, even though it engaged
in cursory screening of photos. The
court here, however, distinguished Costar
as having been decided on summary judgment.
Goldstein alleged that MRIS or an agent of MRIS uploaded the Metro
Photograph. In one exhibit, the photo appears in a slide
in a slideshow that was available on the MRIS website, which didn’t contain any
reference to a particular real estate agent or broker, or to a particular
property. “Drawing all inferences in Goldstein’s favor, this Exhibit, particularly
with the markings added by MRIS, supports the reasonable inference that MRIS or
its agent, rather than an outside user of MRIS, engaged in direct infringement
by copying Goldstein’s copyrighted photograph to its website.”

So far, so good, but the court goes on to say more things
that ought to be disturbing. The court
also distinguished Costar because “(1)
when MRIS received it, the Metro Photograph, on its face, was marked as
copyrighted by Goldstein; (2) MRIS, unlike LoopNet, took the affirmative step
of marking the Metro Photograph as subject to its own copyright; and (3) MRIS
then copyrighted its entire website, including the Metro Photograph.” [The court here means “registered” for (3),
and this conflation pervades the opinion, including the treatment of (1)—after
1978, all original works are “born” copyrighted, so if you see a modern photo
you know it’s “copyrighted,” though you may not know who owns the copyright or
whether it has been licensed or whether a fair use is being made.] (2) is probably bad business practice, but
it’s likely as automatic as many other activities that have been held not to
strip ISPs of the DMCA safe harbor, when the court gets around to that. Anyway, I’m not sure why any of these three
facts makes MRIS’s conduct “volitional” if Loopnet’s wasn’t. The court said that “MRIS doubly asserted a
copyright in the Metro Photograph by stamping that facially copyrighted
photograph with its own copyright markings and then copyrighting the entire
website containing that photograph,” but that’s still not “volitional” conduct implicating the rights protected by
copyright, under Costar.

Further comment: It seems really, really unlikely that MRIS
uploaded the photos, as opposed to a MRIS user.
Should my prediction prove true, should MRIS get its attorneys’ fees for
defending the direct infringement claim?

Contributory/vicarious infringement: contributory
sufficiently pled; vicarious not. MRIS
knew or had reason to know of Goldstein’s copyright, because “[w]here works
contain copyright notices within them, as here, it is difficult to argue that a
defendant did not know that the works were copyrighted,” and when MRIS got
Goldstein’s C&D, it knew or had reason to know of the infringing use. And

MRIS’s practice of adding its own
copyright to the Metro Photograph, a practice it continued even after being
placed on notice that the Metro Photograph was being used on its website
without Goldstein’s permission, can reasonably be considered ‘conduct that
encourages or assists the infringement.’ For example, the addition of the MRIS
copyright markings could lead MRIS users to believe that they had a license to
use the Metro Photograph in their listings as part of their subscription to the
MRIS service.

Though MRIS asserted that it promptly removed each
reappearance of the photo, that wasn’t enough on a motion to dismiss, and its
continued reappearance was enough for contributory infringement [in the absence
of the DMCA].

Vicarious infringement/inducement: MRIS likely had the right
and ability to control the infringing activity and charged a fee to post
listings on its website, “the website has as its main purpose the posting of
real estate listings, a purpose distinct from trafficking in infringing
material. It is therefore not reasonable to conclude that the availability of
infringing photographs such as the Metro Photograph drew customers to subscribe
to the MRIS service.” The inducement claim failed for similar reasons.

Compliance with the DMCA, the court further held, was an
affirmative defense not suitable for resolution on a motion to dismiss. And here it gets even worse, though
presumably the court could at least fix this on summary judgment: the court
suggests that the copyright notice on the photo might trigger actual knowledge
that using the photo would infringe “a copyright.” How is that actual notice, especially given
an automated upload? Moreover, the
statutory provision that noncompliant DMCA notices don’t give actual knowledge
would seem to preclude this reasoning, since a watermark is a far cry from a
DMCA notice with all the relevant information.
And again, the court suggested that MRIS’s addition of its own watermark
went beyond “storage at the direction of a user of material that resides on a
system or network” to “affirmative appropriation of another’s copyright.”

CMI violations: Goldstein alleged violations of § 1202(a) and
(b). §1202(a) makes it unlawful for a
person to “knowingly and with the intent to induce, enable, facilitate or conceal
infringement provide copyright management information that is false.” §1202(b)
prohibits a person, “without the authority of the copyright owner or the law,”
either to “intentionally remove or alter any copyright management information”
or to “distribute” work “knowing that copyright management information has been
removed or altered …knowing or ... having reasonable grounds to know that it
will induce, enable, facilitate, or conceal an infringement.” Again, the complaint adequately stated a
claim, though the court commented that Goldstein could only recover once for a
§1202 violation.

MRIS unconvincingly argued that the watermark wasn’t CMI
because it didn’t meet the requirements for a full copyright “notice.” §1202
doesn’t require that. §1202(a)’s
requirements were satisfied because MRIS allegedly added its own copyright
watermark to the photo without owning the copyright. MRIS argued that it had a copyright in the
database as a whole, thus had a good faith belief that its watermark wasn’t
false. That didn’t work because of (1)
Goldstein’s watermark and (2) the procedural posture of a motion to
dismiss. MRIS argued that its watermark
wasn’t added knowingly and with the intent to facilitate infringement, because
it was added “automatically” to all images uploaded to their site, but again
that’s not an argument that works on a motion to dismiss, and anyway
Goldstein’s C&D provided actual knowledge.

§1202(b): MRIS argued that it didn’t “intentionally remove
or alter any copyright management information,” since Goldstein’s watermark was
left intact. The court, however,
declined to dismiss Goldstein’s claim that adding CMI was “constructive”
alteration of his own CMI, since it had “more visual impact” and “undercut[]”
the message that Goldstein owned the copyright. There was no case law either
way on constructive alteration of CMI, but, “[p]articularly where MRIS’s
copyright mark was placed immediately before Goldstein’s copyright mark and
used more recent dates, that mark could be construed as trumping, diluting, or
superseding, and thus altering, Goldstein’s CMI.”

Creative Commons/disclaimer

Text on this blog is licensed under a Creative Commons Attribution 2.5 License. Pictures and works quoted may be subject to other parties' copyrights.
I speak for myself. On this blog, I do not and cannot speak for Georgetown Law, the Organization for Transformative Works and/or AO3.